Tech selloff may ease pressure on the Federal Reserve, says BMO economist

A tech sector selloff could ease pressure on the Federal Reserve by cooling inflationary pressures, according to a BMO economist, potentially giving the central bank more flexibility in monetary policy. The argument rests on the idea that a pullback in tech valuations reduces wealth effects and speculative froth, which have been cited as contributors to persistent inflation. While the article does not cite specific figures, the tech sector has been a dominant driver of equity market gains, meaning its performance carries outsized weight in broader financial conditions. For markets, the significance lies in the linkage between equity valuations and rate expectations: a sustained tech cooldown could shift pricing for future Fed rate decisions. Investors will be watching upcoming inflation data and Fed communications to see whether softer tech valuations translate into a more accommodative policy path.